PETALING JAYA: Analysts have upgraded Petronas Chemicals Group Bhd (PetChem) to a “buy” given brighter business prospects.

MIDF Research has also revised its target price for the stock upward to RM8.18 from RM7.58, citing attractive potential upside for investors considering the share price weakness over the past three months.

Affin Hwang Capital said while it expects further earnings weakness in 2H’17, it believes this has been reflected in the stock price.

“Despite the softer 2H’17, we expect PetChem to register 14% earnings per share growth in 2017. Hence, we upgrade the stock to a ‘buy’ and a higher target price of RM8.00,” it noted. PetChem’s net profit doubled to RM964 million for the second quarter ended June 30, 2017 from RM462 million in the previous corresponding period, thanks to higher volumes, stronger greenback and lower operating expenditure.

MIDF Research expects PetChem’s FY17 earnings to exceed RM4 billion as the product average selling prices are strengthening and stabilising especially for the olefins and derivatives segment and given the sales volume continue to pick up.

MIDF Research said PetChem’s cumulative earnings for the six months of FY17 of RM2.4 billion exceeded its and consensus expectations, accounting for 67% and 75% of its full year earnings estimates respectively. MIDF was previously expecting overall plant utilisation rate to be lower coupled with product prices softening in 2Q’FY17 onwards.

PetChem’s share price fell one sen to close at RM7.02 last Friday on some 7.779 million shares done, giving it a market capitalisation of RM56.16 billion.